Sept. 13 (Bloomberg) -- Carbon permits in Europe’s cap-and-trade program are “underpriced” and should be more than three
times higher to achieve the region’s post-2020 emissions-reduction goals, Bloomberg New Energy Finance said.

“Looking at how the scheme will evolve up to 2020 and
beyond, the price today should be 40 to 60 euros ($54.50 to
$81.70) a metric ton of carbon dioxide, compared to the current
price of around 12 to 13 euros,” New Energy said today in an e-mailed statement about a Sept. 6 report. “By 2020, prices will
need to rise to 60 to 90 euros.”

European Union carbon allowances for delivery in December
have lost almost 16 percent this year because of an oversupply
amid recession, concerns about economic growth and a sovereign-debt crisis in the region. The contract rose 3 cents to 11.94
euros a ton on the ICE Futures Europe exchange at 10.26 a.m. in
London. One allowance carries the right to emit one ton of
carbon dioxide.

“While there is a lot of surplus sloshing around at the
moment, that won’t last forever,” Guy Turner, director of
commodity research at New Energy Finance, said by phone from
London. When the market starts noticing the looming shortage,
“the cost of reducing emissions in Europe will be much higher
than people think,” he said in the statement.

The EU’s emissions program, the world’s largest, imposes
pollution limits on more than 11,000 utilities and factories,
including Electricite de France SA, Europe’s biggest power
generator, and Royal Dutch Shell Plc, the continent’s largest
oil company. The constraints lead to a cap in 2020 that will be
21 percent below 2005 levels and continue to decrease by 1.74
percent annually after 2020.

Forecast Deficit

The forecast deficit of around 1.97 billion permits from
2008 to 2020 will be partly met by imports of international
carbon credits, resulting in a net shortage of around 300
million tons, New Energy said.

After 2020, fundamentals of the EU cap-and-trade will
change, it said. The system is likely to have a deficit of
around 170 million tons in 2013, rising to 380 million tons in
2020 and 660 million tons in 2028, according to the report.

As access to low-cost emission-reduction measures starts to
run out, regulators may curb the allowed use of international
credits, pushing the carbon price to 100 euros per ton, New
Energy said.

The report said the cost of meeting emissions targets will
reach 100 euros a ton by 2024 without any access to
international credits, and 65 euros a ton with access to
offsets. “Discounted back to 2011, the prices are 64 euros and
42 euros, respectively,” the report said.